The Kenyan government has secured a major financial reprieve after successfully renegotiating the repayment terms of loans taken from China to finance the Standard Gauge Railway (SGR). President William Ruto’s administration confirmed that the revised agreement will significantly ease pressure on public finances and improve debt sustainability.
Under the new arrangement, Kenya has extended the repayment period for the SGR loans and secured a fresh grace period. Previously, the country was required to repay both principal and interest to China Exim Bank by 2035. However, the National Treasury revealed that the loans have now been restructured into a 15-year facility starting this year, accompanied by a five-year grace period during which Kenya will not pay the principal amount.
As part of the renegotiation, three loans that were originally denominated in US dollars were converted into Chinese yuan. Treasury officials say this currency swap is expected to save Kenya approximately $215 million (about KSh 27.7 billion) annually. The move also reduces Kenya’s exposure to dollar-related currency and interest rate risks.
Kenya borrowed about $5.08 billion (KSh 655 billion) from the China Export-Import Bank in the 2015 financial year to construct the SGR line from Mombasa to Nairobi and later extend it to Naivasha. The loans were initially set to mature between January 2029 and July 2035, with interest payments due twice a year.
With debt servicing now consuming more than half of government revenue, the extended loan tenure is expected to provide much-needed fiscal breathing space. The Treasury projects that annual SGR loan servicing costs will drop to about KSh 37 billion, down from the earlier estimate of KSh 50 billion.
